All posts tagged Betfair

Perennially divisive online betting exchange Betfair offered up fuel for both the bulls and the bears Wednesday when it reported better-than expected full year earnings and a £50 million share buyback, but sales came in behind expectations after a tough start to 2011.

Without the World Cup boost, Betfair’s current trading is behind last year, and it has to wait until the second half before some of the investments it is making to improve its betting products will kick in. Meanwhile it faces growing competition from the traditional land-based bookmakers like William Hill and Ladbrokes which are scrambling to up their online game.

Still, the company is generating cash (£155 million at April 30), hence the £50 million share buyback and maiden dividend of 5.9 pence a share, which still leaves it with some money for acquisitions according to departing chief executive David Yu.

But the bears have so far prevailed as the share price has almost halved since it listed last October and one of the key criticisms levelled at Betfair on Monday, when Mr. Yu announced his intension to step down, was inadequate communication to the market.

“While the regulatory backdrop has had a part to play in the poor share price performance since IPO, we don’t believe that the company has helped itself. Strategically there are a number of areas where the group might have been more aggressive (eg fixed odds betting product), while the communication of the story to the City could have been better,” Peel Hunt analyst Nick Batram said in a note Monday.

It seems Betfair took this to heart at Wednesday’s earnings announcement, in which it was surprisingly candid about the past year’s shortcomings.

Unexpected executive departures are usually followed by negative share reaction. True to form, the announcement by Betfair that CEO David Yu is to step down whacked its shares with almost 3% wiped off the online betting exchange’s share price in trading today.

But that’s small change compared to the near 600 pence pence (44%) the share price has lost since its initial public offering in October 2010.

Unfortunately, high rolling customers on one of Betfair’s potential cross-selling products, poker, failed to rejoin the company after it migrated to a new online system. Then regulatory restrictions severely crimped hopes for overseas expansion and LMAX has proved a very damp squib indeed.

Betfair cites Mr. Yu’s tenure (six years as CEO and another four before that as chief technology officer) as a key reason for his decision to depart once a successor is found, but the timing seems more strategically opportune.

There were a mere handful of IPOs this year but two of the largest -– Ocado and Betfair -– couldn’t have been at farther ends of the beauty parade.

Amid scathing criticism of its business model online grocery retailer Ocado only just managed to get away, then its shares fell 10% on its first day of dealing, while Betfair flew off the shelves faster than a Heston Blumenthal Christmas pudding, soaring 18% on its first day.

Today Ocado remains around 10% off its IPO price, while Betfair is down 17%.

Before I end up pelted with apples and pears, I know they aren’t directly comparable, but it’s a perception thing. The market was willing to ignore most of the 13 pages of risk factors in the Betfair prospectus, but it seems investors are in an unforgiving mood after a disappointing set of interim results.

And Ocado, after months of naysaying, has recovered some lost ground although it is still under water.

What the market seems to have forgotten is that despite its high-tech betting exchange model, Betfair is still ultimately a betting portal subject to (some) of the same pressures as its rivals.

(via ft.com) On student versus Apple story. “Mr Jobs may be a slightly unpleasant piece of work, scary and arrogant. But if these messages [to student Chelsea] are his, I congratulate him on his clarity, his tetchiness and on being entirely in the right. Chelsea is to be congratulated, too. By goading the head of Apple, she has unwittingly stumbled on a much better topic for a journalistic paper than some nonsense about the iPad.”